2September: the melody lingers on - does the music stop in Europe?

Another month passed, and again air cargo showed a healthy year-over-year (YoY) revenue increase. The main engines for September’s worldwide USD-revenue growth of 6% were the origins Asia Pacific (+7.7%) and North America (+6.6%). Volume increased by 6.6% worldwide, yields dropped by 0.6%, in spite of yield growth in Europe and the Middle East & South Asia (MESA). Revenues from the transport of perishables (PER) and pharmaceuticals (PHARMA) increased by 9% resp. 16% YoY, enlarging the share of these products in worldwide revenues: from 8.1 to 8.4 % (PER), and from 3.2 to 3.5% (PHARMA).Among the thirty largest country pairs, the star performers in September (YoY) were Germany-South Africa (+67%), China East – USA Midwest (+58%) and Japan – USA Midwest (+45%). The overall September performance was pretty much in line with earlier months, so that the year-to-date figures were further solidified. This means a.o. that the following countries registered a more than 20% growth in USD-revenues (for the year so far, for inbound and outbound together): Myanmar, Bahrain, Vietnam, Mauritius, Benin, Slovakia and Morocco.

These days, some pundits call Europe the sick old man of the air cargo world. Surely, to successfully compete globally, in whatever activity, Europe must bring down its unit cost and make labour more flexible. But is the European air cargo market also in bad shape? We compared revenues in USD for the first nine months of 2014 with the same period one year and three years ago.

It may come as a surprise that the origin Europe tops the revenue growth charts, showing a very healthy 7.8% growth YoY. Compared with 2011, the growth was 1.2%, the best of all regions except MESA. By the way, Europe also came out on top when talking revenues in Euros. Europe is the only origin region showing a YoY yield improvement to all other regions. As a matter of fact, all other regions show yield decreases YoY, making Europe the origin that is single-handedly responsible for the fact that worldwide USD-yields hardly dropped over the first three quarters. The bad news is that destination Europe presents a different picture: the largest revenue drop compared to three years ago (-13.7%), whilst the growth compared to last year was smaller than the worldwide average.

We also looked at how the carriers from the main regions performed. By now, it is common knowledge that Middle Eastern airlines grow fastest in all regions. But how do the others perform? Compared with three years ago, worldwide revenues in USD dropped by 4.5%. The % of cargo revenue European carriers lost to and from Europe, was smaller than the % lost by their Asian Pacific and North American colleagues in the same markets. Interestingly, the North Americans saw a larger revenue drop % than the Europeans and Asians in the markets to and from North America. For the region Asia Pacific, the results were mixed: Asian carriers showed a lower % revenue loss than the others in markets from Asia Pacific, but they suffered relatively more in markets to their region. All this to say that the European carriers did not do too badly over the past three years compared to carriers from the two other big regions.

However, in the more recent past (2014 vs. 2013), the Europeans lost revenue share, both from and to Europe. The same is true for the Americans and – to a lesser extent – the Asians to and from their respective home regions. In other words, it is not only Europe that is put on the defensive in an emerging new air cargo world order. Controlling cost will be paramount for everyone taking on the fast growing competitors from the Middle East.